Market participant issue selection system and method

ABSTRACT

A system and method of allocating rights for quoting issues on a trading facility such as an exchange is described. The method may include providing market participants such as remote market makers with a listing of issues available for remote quote streaming where the available issues are ranked according to predetermined trading parameters. A market participant requests allocations of rights to certain issues and the request is filtered according to a value associated with the ranking of the selected issues. The system includes an issue selection database having a listing of issues available for trading where each issue is ranked based on a trading parameter. An issue selection communication module communicates with the issue selection database and is configured to list available issues and rankings. An issue allocation filter receives a market participant request and compares the selected issues in that request to one or more exchange-based rules.

CROSS-REFERENCE TO RELATED APPLICATIONS

This application is a continuation of U.S. application Ser. No.12/836,349, filed Jul. 14, 2010 now U.S. Pat. No. 8,209,255, which is acontinuation of U.S. application Ser. No. 11/102,490, filed Apr. 7,2005, now U.S. Pat. No. 7,809,629, wherein the entirety of each of theseapplications is hereby incorporated herein by reference.

FIELD OF THE INVENTION

The present invention relates to the trading of financial instruments,such as options or futures. More particularly, the present inventionrelates to a trading facility, such as an exchange, and method forallocating to market participants, such as market makers, the right toquote for particular issues on an exchange.

BACKGROUND

Traditional market making activity, on an exchange that trades financialinstruments, involves a market maker providing liquidity to a market,for example through streaming quotes for both a bid and an offer at aparticular price. In return for the right to stream quotes, the marketmaker is often required by the exchange to quote in certain maximumbid/offer spreads, maintain a minimum number of active quotes or engagein other functions deemed necessary by the exchange to maintain a fairand orderly market. In an open outcry exchange, market maker status istypically attained through an application process mandated by anexchange in which the right to act as a market maker for instrumentstraded at a specific location, or pit, on a trading floor is requestedby a party who is a member of the exchange. With the advent ofall-electronic, and combined electronic and open outcry trading, marketmaking may now take place in an entirely electronic virtual tradingcrowd remotely from a trading floor. Accordingly, there is a need for amore flexible market maker issue selection process that is not limitedto grouping issues available for quoting by market makers to thosetraded in predefined pits or locations on a trading floor.

BRIEF SUMMARY

In order to address the challenges in arranging for market makers torequest quoting rights, and to provide for more flexibility for bothmarket makers and an exchange in negotiating these rights, a system andmethod for allocation of these rights is described. According to a firstaspect of the invention, a method is described where each of the issuesavailable for trading on a trading facility is ranked based on a tradingparameter associated with each issue and a selection value is assignedeach available issue corresponding to the ranking. Upon receipt of arequest for quoting rights in a subset of the available issues, therequest is filtered based on the cumulative selection value. If thecumulative selection value is within an ownership requirement, such as aseat ownership requirement, set by the trading facility, the tradingfacility will authorize the market participant, for example a remotemarket maker, to access the exchange to stream quotes for the selectedissues.

According to another aspect of the invention, an issue allocation systemfor determining which market participants for a trading facility areauthorized to disseminate quotes on the trading facility for aparticular issue includes an issue selection database having a listingof issues available for trading on the trading facility, wherein eachissue is associated with a ranking based on a trading parameterassociated with the issue. An issue selection communication module is incommunication with the issue selection database. The issue selectioncommunication module is configured to transmit the listing of availableissues and the ranking associated with each issue in response to anissue selection query from a prospective market participant, such as aremote market maker. The system also includes an issue allocation filterin communication with the issue selection database. The issue allocationfilter is responsive to receipt of an allocation request from aprospective market participant to compare a list of issues in theallocation request to a cumulative allocation value of issues identifiedin the allocation request, where the cumulative allocation value isbased on the ranking of each issue provided in the allocation request.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 is a block diagram of an exchange in communication with remotemarket makers;

FIG. 2 is a block diagram of an embodiment of an issue allocation systemsuitable for use in the exchange of FIG. 1;

FIG. 3 is a block diagram of a trade engine suitable for use in theexchange of FIG. 1;

FIG. 4 is a flow diagram of an issue ranking and updating process;

FIG. 5 is a flow diagram of a process of authorizing issue selectionrequests using the system of FIGS. 1-3; and

FIG. 6 illustrates an issue selection spreadsheet interface suitable foruse in the system of FIGS. 1-3.

DETAILED DESCRIPTION OF THE DRAWINGS AND THF PRESENTLY PREFERREDEMBODIMENTS

A system and method for allocating to market makers the right to quotefor particular issues, such as classes of securities options, on anexchange is described herein. For purposes of this specification, thefollowing definitions will be used:

Market maker (MM)=professional trader, or organization, registered totrade at the exchange and required to provide liquidity to a market, forexample through streaming quotes for both a bid and an offer at aparticular price.

Remote market maker (RMM)=market maker approved by the exchange tosubmit quotes and orders from a location other than the physical tradingstation for the subject class of option (i.e., from off the floor of theexchange).

Designated primary market maker (DPM)=market maker designated by theexchange to be responsible for a fair and orderly market, and to providecontinuous quotes, for a particular class of options.

Electronic DPM (eDPM)=is a member organization that is approved by theexchange to, remotely from off the floor of the exchange, function inallocated option classes as a DPM and to fulfill certain obligationsrequired of DPMs except for floor broker and order book officialobligations.

Floor broker=individual who represents orders from others in a tradingcrowd on the floor of an exchange.

Issue or Class of options=all series of options related to a givenunderlying asset or instrument, where the underlying asset or instrumentmay be, for example, publicly traded stock of a company.

In order to provide for an orderly market where various issues ofsecurities are properly represented, and where market makers have accessto a selection of desired issues for quoting based on exchange-basedrules, a method and system for allocating issues among one or more typesof market participants, such as remote market makers, is disclosedherein. Referring to FIG. 1, in one embodiment remote market makers(RMM) 10 communicate with an exchange 12 to arrange for quotingprivileges in various issues traded at the exchange 12. The RMMs 10 eachcommunicate via their own communication platform. For example, one ormore RMMs 10 may use stand-alone personal computers, networked devices,wireless connections, PDAs or other known communication mechanisms tocommunicate with the exchange 12. RMM requests for issue allocation mayalso be done in person with market procedures and planning (MPP) staffof the exchange.

A market procedures and planning (MPP) group 14 associated with theexchange 12 may communicate with the RMMs 10 to arrange RMM appointmentsby crowd or customized appointments to specific issues. The MPP mayinclude an allocation system 16, which may include a server or otherdevice having a processor, memory and communication mechanism. The MPP14 preferably maintains current lists of issues traded on the exchange,as well as the rules and requirements for allocating quoting rights toRMMs 10 or others authorized by the exchange. The MPP 14 may communicatewith both the RMMs 10 and a trading engine 18 for the exchange.

Referring to FIG. 2, the allocation system 16 may have a communicationmodule 20, such as a modem, an issue database 22, a ranking module 24and an issue allocation filter 26. The issue database 22 contains alisting of issues traded on the exchange. Within the allocation system16, the issue database 22 is maintained in a memory with a rankedlisting of issues traded on the exchange, for example classes ofoptions. The allocation system 16 may be a stand-alone or distributedcomputer system. Additionally, the methods described below may besoftware instructions executable by the allocation system and stored ina computer readable form in, or accessible by, the allocation system onany of a number of known computer readable media. As described in detailbelow, RMMs may select a customized grouping, also referred to asconfigurable or virtual bins, of issues from this ranked listing inwhich to stream quotes from locations outside the exchange. In otherembodiments, the system and method described herein may be configured toallow one or more other types of market participants, for example MMs,DPMs, or eDPMs, at an exchange or other type of trading facility toselect their own virtual bins. Thus, in different embodiments, selectionof virtual bins may be available to only one type of market participant,such as RMMs, or to any combination of types of market participants.

In one embodiment, the issue database includes a ranking of issues by adesired trading parameter. For example, the trading parameter may benational average daily volume of the issues for the previous three-monthtrading period. The issue database 22 may include information on eachissue such as the option symbol, the underlying stock name and itsassociated stock symbol, internal system tracking identifiers and theranking data. The ranking data reflects the perceived desirability ofthe issue in relation to the other available issues at the exchange.Accordingly, although one trading parameter for use in ranking theissues is noted above, any of a number of other trading parameters maybe used to generate the ranking data. The ranking module 24 ispreferably configured to receive the data relating to the chosenparameter for gauging desirability of the issues and calculate a rankingof the issues in the issue database. The ranking module 24 may be asoftware routine accessible by, or embedded in, a processor in theallocation system 16.

The issue allocation filter 26 applies exchange rules for grantingquoting rights to RMMs. The allocation filter 26 receives requests fromRMMs for specific groups of issue selections and verifies that the issueselection is acceptable to the exchange based on criteria including thevalue of the selected issues and the ownership interest of the RMM inthe exchange, for example amount of shares of stock in the exchangeowned, or the number of exchange seats owned or leased, by the RMM.Additional rules and limitations may also be applied to the RMMrequests. The allocation filter 26 may communicate with the issuedatabase for ranking information and may include or have access to anRMM database containing the RMM acronym registered with the exchange andthe current seat ownership or leasehold data for that RMM. The issueallocation system 16 communicates with RMMs 10 and the trade engine 18via its communication module 20.

As illustrated in FIG. 3, the electronic trade engine 18 contains atrade processor 28 that analyzes and manipulates orders according tomatching rules 30 stored in the database in communication with the tradeprocessor. Also included in the electronic trade engine is theelectronic book (EBOOK) 32 of orders and quotes with which incomingorders to buy or sell are matched with quotes and orders resting on theEBOOK 32 according to the matching rules 30. As with the allocationsystem 16, the electronic trade engine 18 may be a stand-alone ordistributed computer system. Any of a number of hardware and softwarecombinations configured to execute the trading methods described belowmay be used for the electronic trade engine 18. In one embodiment, theelectronic trade engine 18 may be a server cluster consisting of serversavailable from Sun Microsystems, Inc., Fujitsu Ltd. or other knowncomputer equipment manufacturers. The EBOOK 32 portion of the electronictrade engine 18 may be implemented with Oracle database software and mayreside on one or more of the servers comprising the electronic tradeengine 18. The rules database 30 may be C++ or Java-based programmingaccessible by, or executable by, the trade processor 28.

Referring to FIG. 4, an issue ranking and updating process 34 using thesystem of FIGS. 1-3 is shown. Trading parameter data is gathered by theranking module for issues traded on the exchange (at step 36). Thetrading parameter data may be automatically retrieved in electronicformat, or manually entered, from an objective source for that tradingparameter data. In the embodiment discussed above, where nationalaverage daily volume is used to generate rankings, the ranking module 24may be configured to receive daily national trading volume from a sourcesuch as the Options Clearing Corporation (OCC). The ranking module 24stores the trading parameter data in memory and calculates a ranking foreach issue based on the trading parameter data (at step 38). In oneembodiment, the ranking module 24 may collect the trading parameter dataand periodically generate an average of the data. For example, in oneembodiment the ranking module may collect data over a three month periodand perform an averaging calculation. Various other trading parameters,or combinations of trading parameters, may be obtained and averaged bythe ranking module. For example, objective criteria such as marketcapitalization or price variance of underlying stock (if the issues areequity options) may be used.

Once the trade parameter data has been averaged the data may then beapplied to the information in the issue database to update rankings forthe issues (at step 40). In one embodiment, each issue in the issuedatabase may be provided ranking information by the ranking module. Theranking module may provide individual rankings, group a certain numberof issues having a ranking within a desired range into separate tiers,or apply any number of other ranking criteria. In another embodimentwhere individual issue rankings are used to generate tiers of issues,the tiers may be determined by simply dividing the total number ofissues into tiers having equal numbers of issues. In this example, ifthere were 5 tiers and 600 issues, each tier would be assigned 120issues with the first or “A” tier receiving the 120 highest rankedissues, the second or “B” tier assigned the next 120 highest rankedissues, and so on. Alternatively, the tiers may contain uneven numbersof issues, or even different types of issues. For example, if the issuesinclude equity options and index options, the index options may beplaced in a separate tier from the equity options regardless of rank.

Using the ranked and tiered issues listed in the issue database, amethod 42 of enabling RMMs 10 to select issues, or rearrange previouslyselected issues, for streaming quotes is illustrated in FIG. 5. A listof issues on the exchange is provided to the RMM showing the tier, orother, ranking (at step 44). The RMM may then select a desired number ofissues (at step 46). When the RMM has selected its desired issues andsubmitted the selection to the allocation system 16, the allocationsystem checks the selections against exchange requirements, such as seatownership, where the current seat holdings for the RMM and the currentvalues of the selected issues are compared (at step 48). The value, inone embodiment may be a tier value for the tier in which the selectedissue is included. The tier value may be stored in terms of a fractionalseat requirement. Thus, in one embodiment, each tier “A” issue selectedmay be valued at, for example, 0.1 seat so that the selection of 10 tierA issues would require that the RMM own or lease at least 1 seat. Oneexample of seat requirements is illustrated in Table 1 below, whereissues from a particular tier are given a value (multiplier).

TABLE 1 Tier Seat Requirement Multiplier Tier A 1 seat for 10 classes1/10 or .1  Tier B 1 seat for 15 classes 1/15 or .066 Tier C 1 seat for20 classes 1/20 or .05  Tier D 1 seat for 25 classes 1/25 or .04  Tier E1 seat for 30 classes 1/30 or .033

Using the issue value chart of Table 1, an example of an acceptableremote market maker selection for a remote market maker owning one seaton the exchange is illustrated in Table 2.

TABLE 2 Tier Classes Selected Classes/Seat Weighted Total A 4 10 0.400 B3 15 0.200 C 2 20 0.100 D 3 25 0.120 E 3 30 0.100 TOTAL SEATS REQUIRED:0.920

Although the minimum seat requirement is preferably ownership of a wholenumber of seats greater than or equal to the sum of the selected issuevalues, in other embodiments it is contemplated that fractional seatownership rights may be used to acquire quoting rights in issues addingto less than or equal to the fractional ownership of the RMM.

Assuming that the RMM's issue selections meet the minimum seatrequirement, the issue allocation filter may then apply any additionalexchange rules to the request. In one embodiment, the exchange may alsofilter the RMM selection requests by limiting the number of RMMs who areable to quote on a particular issue. The issue allocation filter maymaintain a database of how many RMMs have been approved for quoting oneach issue and deny a request from another RMM to quote in that sameissue if the limit has been reached. These limits, also referred to asclass quoting limits (CQL), may be applied in a number of ways. If theexchange is an all-electronic exchange, the limit may only be applied toRMMs. If the exchange is a hybrid electronic and open outcry exchange,the limit may be applied to how many total entities, such as the sum ofRMMs, MMs, DPMs, eDPMs and any other market participants who can quoteon the exchange, are already approved to quote in those specific issues.

The limits on number of quoters per issue may be set according to howthe exchange believes it may best attract RMMs to use the exchange. Inone embodiment, each tier may allow the same maximum number of RMMs perissue. In an alternative embodiment, the maximum number of RMMs perissue may be higher in the more popular, high value tiers and lower inthe lower ranked tiers so that the greater exclusivity might attractRMMs to select lower tiers. In yet other alternative embodiments, theCQL may be staggered in the same manner as the tier structure. Forexample, while tier A value issues may be the first 120, or 20%, of anavailable 600 issues, the CQL may be set such that the 50 highest rankedissues have a limit of 40 quoters per issue, the next 100 highest rankedissues are allowed 35 quoters per issue, and so on. Also, just as thevalue for issues can be based on tiers or individual issue rankings, theCQL may also differ by issue rather than by group of issues.

If the issue allocation system 16 determines (at step 50) that the RMMselections meet the exchange requirements, the issue allocation systemmay then communicate the approval to the trade engine such that thetrade engine will permit quotes in the selected issues arriving from theRMM to be disseminated to the exchange (at step 52). The issueallocation system also communicates with the RMM to verify acceptance ofthe RMM issue selection. If the issue allocation system 16 determinesthat one or more exchange requirements have not been met, then the RMMwill be informed of the problem and given an opportunity to submitanother request (at step 54).

In order to provide information to RMMs and obtain the RMM issueselection requests, the issue selection system provides access to alisting of issues and a value calculator to guide RMMs regarding theseat requirements for different configurations of RMM virtual bins. Thecommunications between the issue allocation system and the RMMs may bein person with MPP staff or by facsimile, an email, or via an interfaceor interactive website. In one embodiment, an RMM may request and obtainan issue selection spreadsheet from the exchange. An example of an issueselection spreadsheet 56 is shown in FIG. 6. The current status sectionprovides a list of selected issues 58. The spreadsheet 56 may be in theform of a static spreadsheet or an electronic spreadsheet, such as aMicrosoft Excel spreadsheet. The issue selection spreadsheet may have acalculator 60 identifying issue tiers 62, the number of selected classes64 in a particular tier, the weighting per class for a tier 66 and theweighted total 68.

In one embodiment, as shown in FIG. 6, the spreadsheet may includeindividual tabbed pages 70 containing a complete listing of all issues,by tier, available for selection by remote market makers on the exchangein addition to a selected issue tab 58. Tabbed pages may include alisting of all available issues for a particular tier. As shown in thetotal request tab, issues may be listed including an exchange referencecode 72, tier identifier 74, underlying stock name 76, underlying stocksymbol 78 and option symbol 80. The RMM may select a tabbed page andindicate which issues it is interested in including into its bin byentering a selection in a selection space 82 corresponding to thedesired issue. The bin calculator 60 automatically updates the selectedclasses 64 column for the appropriate tier and recalculates the weightedtotal 66 column by multiplying the current number of classes selectedfor a tier by the seat requirement for issues in that tier. Thecalculated total seat requirement 68 also may automatically update byadding together the weighted total for each tier. In one embodiment, thecalculator 60 remains persistently displayed regardless of which tab 70is currently selected. The calculator is responsive to updates in theclass selection space 82 on any of the tabbed pages of issue listings toupdate the seat calculations. The total request tab 58 may display seatrequirement information 84 adjacent each selected issue, as well asdisplaying subtotal seat values 86 for each tier grouping.

Once an RMM has completed the issue selection spreadsheet, thespreadsheet may be transmitted to the issue selection server. In oneembodiment, a printed out version of the spreadsheet may be transmittedvia facsimile and entered by the MPP into the allocation server. Inanother embodiment, the spreadsheet may be maintained in electronic formand transmitted via email to the issue allocation server. In yet otherembodiments, the exchange may allow access to an interactive websitewhere RMMs may log in and manipulate an interface configured in the samemanner as the issue selection spreadsheet to select desired issues. Inone embodiment, where the spreadsheet of FIG. 6 is integrated as aninterface of one or more windows in an exchange website, a submit buttonmay be added to signal to the exchange that a completed selection hasbeen made. Additionally, other criteria besides the seat ownershiprequirements may be updated in the website version so that if an issueselection is unavailable for reasons other than seat ownership, the RMMwould be notified immediately or would not be presented with theselection option for that issue. Upon receipt of a completed issueselection spreadsheet or website selection from an RMM, the issueallocation filter 26 in the allocation system 16 will review theselections and automatically compare exchange rules to those selectionsas described previously.

If the requesting RMM lacks the requisite number of seats, therequesting RMM would receive notification from the MPP that an invalidselection has been attempted. If the issue selections and owned/leasedseats are compatible, then the issue allocation filter 26 will proceedto the next exchange rule application. An example of another rule theissue allocation filter may apply is class quoting limitations. In oneembodiment, an exchange may limit the number of members, including RMMs,quoting electronically in each class. The class quoting limits may bedetermined by tier and set forth in published rules accessible by RMMs.

In instances where an RMM is attempting to select a class already fullysubscribed according to the class quoting limits for that tier, theissue allocation system 16 may store a waiting list of RMMs seeking tostream quotes in that particular issue on a first come first servedbasis, or some other basis as determined by the exchange. Onealternative to the first come first served process may be to analyzepast quoting performance for the RMM on the issue with the waiting list,or on all the RMM's issues generally. In this alternative procedure,RMMs with the best trading volume may be given priority in the waitinglist. When the number of RMMs, or RMMs in combination with other marketmakers, quoting for an issue falls below the CQL, the allocation systemwould use the waiting list to send out automatic reminders towait-listed RMMs to let them know that an issue is again open forselection and provide them a fixed period of time within which to acceptbefore proceeding to automatic notification of the next waitlisted RMM.It is contemplated that issue selection may be made on a quarterly,monthly, or even daily basis to permit greater flexibility for RMMtrading practices. Accordingly, openings for the rights to stream quotesin various issues may occur frequently and wait lists may be a viableoption.

Separate from the selection frequency permitted to RMMs for reorganizingtheir bins of selected issues, the issue allocation system 16 may beconfigured to automatically re-rank and re-tier the available issues ona quarterly or other periodic basis. The re-tiering may be based onquarterly average total national daily volume information for issuestraded at the exchange or any other objective criteria. Once therebalanced tier system is calculated, the issue allocation system 16 mayautomatically notify RMMs, for example via email, if their seatownership requirements are no longer met using their current bin ofissues. The notification may include a grace period announcement andstart a grace period timer in the issue allocation system for allowingthe RMM to adjust its bin of issues to comply with the seatrequirements. In one embodiment, a one month grace period may bepermitted for RMMs to rebalance their customized bin selectionsaccording to the available seats they have. The issue allocation systemmay provide one or more reminders at specific calendar day increments,for example fourteen days before the end of the grace period, to remindRMMs of the need to rebalance.

After expiration of the rebalancing grace period, the issue allocationsystem may discipline non-compliant RMMs. In one embodiment, the issueallocation system may communicate instructions to the trade engine todeny the non-compliant RMM any access to stream quotes to the exchange.Alternatively, the issue allocation system may instruct the tradingengine to deny quoting rights to enough randomly selected issues in theRMM's bin so that the RMM is in compliance with the seat requirement.Other variations of denying quoting access may also be implemented, suchas analyzing RMM trading patterns to automatically deny non-compliantRMMs quoting rights on issues the RMM trades least, or that have thelowest tier value, until the RMM is in compliance.

Because the CQL of an issue may be tied directly to the rank or to thetier in which an issue resides, the periodic re-ranking and re-tieringmay reduce or increase the total number of quoters permitted for thatparticular issue. In one embodiment, where a re-tiering operation movesan issue into a tier having a lower CQL, the issue allocation system maybe configured to allow any market makers already permitted to streamquotes for the issue to retain the right to do so, given adequate seatownership, even though there would be more remote market makers than theCQL would normally permit. Any market maker approved for an issue thatis oversubscribed, however, would be cut off from reselecting that issueif the market maker relinquished the right for a period of time and thenwanted to redesignate the oversubscribed issue at a later time.Conversely, if an issue moves in rank/tier to a higher CQL, the issueallocation system may communicate with wait-listed market makers toindicate availability of the issue.

Although the above description describes remote market making generally,it is contemplated that the issue allocation methods described above mayapply to all-electronic exchanges where all market making is in virtualtrading crowds (VTCs) as well as in hybrid trading exchanges wherevirtual trading crowds and live trading crowds (i.e. open-outcry tradingon the floor of an exchange) take place. One example of a hybridexchange is discussed in US 2004-0215538 A1, published Oct. 28, 2004,the entirety of which is incorporated herein by reference. Also, theembodiments of the system and method described above may be configuredto apply only to selection of issues for remote market makers, or toapply to one or more other types of market participants whether remotelylocated or on the floor of the exchange.

It is intended that the foregoing detailed description be regarded asillustrative rather than limiting, and that it be understood that it isthe following claims, including all equivalents, that are intended todefine the scope of this invention.

We claim:
 1. An option class selection system for authorizing marketparticipants to disseminate quotes on a trading facility for at leastone option class, the option class selection system comprising: anoption class selection database, the option class selection databasecomprising a listing of a plurality of option classes available fortrading on the trading facility, wherein each option class is associatedwith a numeric value based on a trading parameter associated with theoption class; a communication module configured for communicating with atrade engine of an exchange; and a processor in communication with thetrade engine and in communication with the option class selectiondatabase, the processor configured to: receive a request to obtainrights to submit quotes in a subset of the plurality of available optionclasses from a market participant having a quoting privilege at theexchange, wherein the quoting privilege of the market participant isless than an amount necessary to obtain rights to submit quotes in allavailable option classes; calculate a total of the numeric valuesassociated with the option classes in the subset; determine if the totalof the numeric values is less than or equal to a value of the quotingprivilege associated with the market participant; and authorize themarket participant to submit quotes in the subset if the total of thenumeric values is less than or equal to the value of the quotingprivilege.
 2. The option class selection system of claim 1, wherein theprocessor is further configured to: revise the numeric value on aperiodic basis.
 3. The option class selection system of claim 2, whereinthe periodic basis is quarterly.
 4. The option class selection system ofclaim 1, wherein the trading parameter is based on a volume traded ofthe option class.
 5. The option class selection system of claim 1,wherein the quoting privilege is calculated based on an ownership orcurrent lease of exchange issued rights.
 6. The option class selectionsystem of claim 1, wherein the exchange comprises an all-electronicexchange.
 7. The option class selection system of claim 1, whereinauthorizing the market participant to submit quotes comprisescommunicating an authorization message to the trade engine, theauthorization message comprising information identifying the marketparticipant and information identifying option classes in the subset ofthe plurality of option classes.
 8. The option class selection system ofclaim 1, wherein the trading parameter comprises a price variance of anunderlying asset of the option class.
 9. The option class selectionsystem of claim 1, wherein the processor is further configured totransmit available option classes for display, and receive the requestto obtain rights, over an electronic interface.
 10. The option classselection system of claim 9, wherein the electronic interface comprisesa website.
 11. A computer-implemented method for authorizing marketparticipants to disseminate quotes on a trading facility for aparticular option class, the method comprising: in an option classselection system having an option class selection database of aplurality of option classes available for trading, a communicationmodule configured for communicating with a trade engine of an exchangeand a computer processor in communication with the trade engine theoption class selection database, the computer processor: receiving arequest to obtain rights to submit quotes in a subset of the pluralityof available option classes from a market participant having a quotingprivilege at the exchange, wherein the quoting privilege of the marketparticipant is less than an amount necessary to obtain rights to submitquotes in all available option classes; calculating a total of numericvalues in the option class selection database associated with the optionclasses in the subset, wherein each numeric value is based on a tradingparameter associated with the option class; determining if the total ofthe numeric values is less than or equal to a value of the quotingprivilege associated with the market participant; and authorizing themarket participant to submit quotes in the subset if the total of thenumeric values is less than or equal to the value of the quotingprivilege.
 12. The computer-implemented method of claim 11, furthercomprising the computer processor revising the numeric values on aperiodic basis.
 13. The computer-implemented method of claim 12, whereinthe periodic basis is quarterly.
 14. The computer-implemented method ofclaim 11, wherein the trading parameter is based on a volume traded ofthe option class.
 15. The computer-implemented method of claim 11,wherein calculating the quoting privilege comprises calculating thequoting privilege based on an ownership or current lease of exchangeissued rights of the market participant.
 16. The computer-implementedmethod of claim 11, wherein the exchange comprises an all-electronicexchange.
 17. The computer-implemented method of claim 11, whereinauthorizing the market participant to submit quotes comprisescommunicating an authorization message to the trade engine, theauthorization message comprising information identifying the marketparticipant and information identifying option classes in the subset ofthe plurality of option classes.
 18. The computer-implemented method ofclaim 11, wherein the trading parameter comprises a price variance of anunderlying asset of the option class.
 19. The computer-implementedmethod of claim 11, further comprising the transmitting available optionclasses for display, and receiving the request to obtain rights, over anelectronic interface.
 20. The computer-implemented method of claim 19,wherein the electronic interface comprises a website.